Tony Abbott’s party

Financial Review Sunday host Deborah Knight: Our 28th Prime Minister started the day with his regular bike ride and an acknowledgement that he has a lot of work to do. Tony Abbott is promising to deliver what business has been crying out for: predictable, stable government with a focus on economic growth. Mr Abbott is on track to lead a government of 88 seats in the House of Representatives to Labor’s 57, with 1 Green, 2 Independents and 2 seats still too close to call. In a moment we’ll bring you our exclusive interview with the new Treasurer Joe Hockey but first here’s Eddy Meyer with the story of an historic election win.

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Eddy Meyer: There may have been a sense of inevitability about this election; victory though is no less sweet.

Tony Abbott: And I can inform you the Australian Labor Party’s vote is at the lowest level in more than 100 years.

Eddy Meyer: To a packed ball room of supporters, the Prime Minister elect again promised a government of no surprises, no excuses.

Tony Abbott: From today, I declare that Australia is under new management and that Australia is once more open for business.

Eddy Meyer: The sweeping election victory was evident little more than an hour after the polls closed, clear a short time later.

Channel 9’s Lisa Wilkinson: Our counter now says that the magic number, 76, has been reached, we have a new government; Tony Abbott is the incoming Prime Minister.

Channel 9’s Laurie Oakes: That’s a big shock.

Channel 9’s Karl Stefanovic: That was breaking news right now.

Channel 9’s Laurie Oakes: I think we broke that weeks ago.

Former Prime Kevin Rudd: Give us a couple more days we might have got there.

Eddy Meyer: At 22 minutes, Kevin Rudd spoke for twice as long as Tony Abbott.

Minister Kevin Rudd: I know that Labor hearts are heavy across the nation tonight and as your Prime Minister and as your parliamentary leader of the great Australian Labor Party, I accept responsibility.

Eddy Meyer: He was in the end spared the humiliation of losing his seat and held off the predicted bloodbath in Queensland, but it wasn’t enough.

Kevin Rudd: So I will not be recontesting the leadership of the parliamentary Labor Party.

Laurie Oakes: David Bradbury from Linsday, this is very sad seeing David Bradbury go down… Bye David.

Eddy Meyer: Not everything went the Coalition’s way, Jaymes Diaz’s campaign for Greenway ended as it began, with a crash.

Coalition candidate Jaymes Diaz: It wasn’t an ideal start but we’re all human, we all make mistakes and you’ve just got to pick yourself up and keep going.

Eddy Meyer: The new parliament will look very different, not least because billionaire Clive Palmer appears to won one the seat of Fairfax, a man it seems not yet conditioned to the rigours of political life.

Seven News: How many people will you sue in your term at parliament Clive?

Businessman Clive Palmer: This is the sort of rubbish that you tried to suggest that we wouldn’t be elected and you’ve been proven wrong by the people of Fairfax. Ok thanks very much, bye, bye.

Eddy Meyer: Another billionaire made an unexpected appearance cheering former Senator Barnaby Joyce, now a lower house MP.

Businesswoman Gina Rinehart: Australia does need to see a government that’s a bit more inclined to recognise we’re in record debt.

Coalition MP Barnaby Joyce: When you have someone like Gina, who is an Australian who actually is so different from other companies who actually are not Australian, and we should be proud of them, we shouldn’t kick them around.

Eddy Meyer: Well this has gone pretty much to script, less certain, the Senate, a huge field of 529 candidates means it could be a week before that result is fully known, either way it doesn’t come into play until July next year. Which means that to pass his ambitious agenda, the new Prime Minister must work with the current Senate where Labor, the Greens and Independents hold the balance of power. For now at least our 28th Prime Minister appears unfazed.

Tony Abbott: The time for campaigning has passed, the time for governing has arrived, I pledge myself to the service of our country.

Deborah Knight: And joining us this morning Jennifer Westacott, Chief Executive of the Business Council of Australia and Laura Tingle, political editor with the Financial Review. Good morning to both of you. Laura, a resounding Coalition win and the worst primary vote in a century for the ALP but not quite the wipe out that many predicted.

Financial Review political editor Laura Tingle: No I think Deb if you look at the two-party preferred numbers they’re not as big a wipe out as predicted and despite the fact that you’ve got that worse primary vote, the Coalition was only able to lift it’s own primary vote very marginally because of the minor parties. Essentially a lot of people wanted to see the end of Labor, wanted to see the end of chaos, but they weren’t prepared to switch into the Coalition camp. That’s going to embolden Labor on the whole question of mandates in the Senate in the next 12 months and that will become quite a significant issue I think.

Deborah Knight: And the threat of the double-dissolution still looms large if they can’t get things through the Senate?

Laura Tingle: Well it does, it’s not just getting rid of the carbon tax and the mining tax but we’ve got signs that the Building and Construction Commission may be blocked and the Paid Parental Leave scheme could also be amended along the way, but that’s not such a double-dissolution issue at this stage.

Deborah Knight: Now Jennifer the business groups have always said you want certainty; you want stability as a result from this election are you confident you’ll get that under Tony Abbott?

BCA chief executive Jennifer Westacott: I think we are for a couple of reasons, firstly they’ve committed to going back to good government process and it’s interesting, when you talk to business leaders about what has undermined confidence it’s often the process, not just the policies. We’ve had a lot of ad-hoc policy on the run that’s really – I think – harmed business confidence. And the second issue is that this is a government with a very clear mandate for the sorts of policies that are going to lift competitiveness, create jobs, drive economic growth, the issue will be the Senate. But this is a government that understands the role of business, understands that it’s business that drives wealth and job creation and is committed to working with so on balance we’re very confident that we’ll get that predictability and certainty.

Deborah Knight: And as a result what are the things that you want to see achieved under the first term of the new Abbott government.

Jennifer Westacott: Well I think there’s there things that business is looking for, first of all fixing up some of the policy problems; the mining tax, the carbon tax, the abolition of the Building Construction Commission; we want to see those things gone. The second thing though and it’s very important though much harder is to start the structural reform of tax reform, getting the audit of government spending absolutely right so that you’ve got the budget sustainable in the next decade, starting the work on a productivity commission review on workplace relations, unpacking bad regulation, getting a better process for regulation making. And the third thing is this issue of policy process, restoring a proper cabinet process and a proper approach of consulting with industry and business.

Deborah Knight: As Tony Abbott says a lot of work to do and Laura where to here for Labor now, obviously Bill Shorten and Anthony Albanese are both being touted as potential leaders.

Laura Tingle: I think they are, one has to look at it pragmatically and think that whoever becomes leader now probably won’t be leader in time to become Prime Minister. The weighting seemed to be going behind Anthony Albanese last night, partly because he was one of the few characters who emerged from the whole Gillard-Rudd thing in tact, we saw at the campaign launch last week he’s seen as a figure who’s able to breach both camps so at a time when the Labor party is going to have to re-invent itself and come back together, he’s probably quite a good healing figure. Whereas Bill Shorten ended up causing a lot of divisions and had a lot of division with parts of the union movement.

Deborah Knight: Yeah some rebuilding for Labor to come.

Joe Hockey on Treasury figures

Deborah Knight: Joe Hockey has confirmed to Financial Review Sunday that he will bring in an external auditor to run through Treasury figures on the nation’s finances. In his first TV interview after Labor’s election victory, I asked the new Treasurer if it’s a case of be careful what you wish for as he confronts what he calls a budget emergency.

Treasurer Joe Hockey: I’m always up for a challenge and this is a challenge, we are very focused on meeting head on some of the structural challenges the Australian economy faces, we’ll do it in a methodical and careful way but we will do it.

Deborah Knight: Trust was obviously a huge issue in this election campaign and we did see Tony Abbott in the dying days of the campaign say that he would rather commit and make sure that he keeps his spending promises rather than be concerned with the issue of the surplus, that must strike the fear of God into you as the Treasurer?

Joe Hockey: No because our spending promises were modest and many of our spending promises were focused on improving productivity, our bring forward of infrastructure is going to be a shot in the arm for economic growth, even some of our critics recognise that. Also we’ve got a clear path forward, 1st of July next year the carbon tax goes, the mining tax goes, that will improve economic growth and then the 1st of July the following year, in kicks our company tax cut and the PPL and that in turn will also stimulate growth so I think what Australian business is crying out for is predictable, stable, methodical government, that’s exactly what we’re going to deliver.

Deborah Knight: They’re also crying out for bold reforms as well, on the issue of tax reform and freeing up the labour market, not going to be committed to you in your first term of government?

Joe Hockey: Well we’ll be sensible about industrial relations, I think we’ve laid out a good path, the Australian Building and Construction Commission coming back will be a very, very significant step forward but again the fear of god should be struck into business at the though of a re-election of Labor with taxes coming out of left field and what we want to do is have stability, peel back some of the ridiculous taxes – like the mining tax – and we’re not going to proceed with the changes on FBT, that’s huge.

Deborah Knight: Do you have faith in the Treasury forecasts?

Joe Hockey: Well I’ll sit down with the Treasury and go through their methodology, I’ll test that methodology and even use external people to help me to test it to see how robust it is. But I think the conditional nature of the forecasts in the pre-election economic fiscal outlook clearly illustrates that there’s tremendous downside risk but what I’m saying emphatically to the people of Australia is no more surprises out of a government, you can go forward and spend your hearts out because we’re going to have a good Christmas.

Deborah Knight: Could we perhaps see that your commitment to getting back into the black might be blown out further?

Joe Hockey: No let’s focus on growth, let’s focus on growth and job security. If there’s job security as a result of economic growth you’ll see consumers unleash their balance sheets and if they do that business will respond and will unleash their balance sheets as well.

Deborah Knight: Joe Hockey speaking to me last night. Well costings were key to this campaign and in the end there was little difference really in the budget offerings between both parties. Jennifer should getting back to surplus be a bigger priority for Joe Hockey?

Jennifer Westacott: Well I think that the government recognises it has to get back into surplus, the question is always how and the timing. What business wants to see is a credible plan to get back to surplus which is why the audit of spending, which the government is committed to is so important to get right because it can not only get the budget back into surplus, it can lay the foundation for a sustainable budget for the next decade. So it’s crucial that that be done really, really well and to be frank you can’t do that from opposition, you can’t do a commission of audit from opposition so we’re very confident that the government wants to get back into surplus in a careful, proper way and doing these commissions of audit, which I’ve done myself are not easy and they’ve got to be done very carefully but make no mistake, getting back into surplus in the next 5 years is hugely important to business.

Deborah Knight: Getting it right. And Laura, Joe Hockey said there won’t be any changes to promised policies like the paid parental leave scheme but will he have to tweak it to actually get it passed, to get it through the Senate?

Laura Tingle: Well this is going to be one of those real tests of not changing Deb because you’ve got the business community not really liking this scheme, they’ll accept the mandate on it I’m sure but we’ve already heard signs from the minerals councils this morning that they want to make sure that…

Deborah Knight: What have they said?

Laura Tingle: Well they’re essentially saying we’ve got to take into account the existing schemes that people have in place and that we have to have transitions for those. We’ve got the Nationals who really don’t like this and are going to be feeling pretty uppity because they’ve got a couple of extra seats and Barnaby Joyce now in the house plus you’ve got the Greens indicating that while they will pass the bill in the Senate they will seek modifications to make it more equitable in their eyes. So this is one of the really interesting tests about how much compromise Tony Abbott and Joe Hockey are prepared to make to get the scheme through.

What the election means for the economy

Deborah Knight: So what will this election mean for our economy, for our share markets and for your bottom line? We brought together our very own three wise men to look ahead and assess if Australia really is open for business.

Financial Review associate editor Philip Baker: Well history tells us that straight after an election the share market and the Australian dollar normally rise but having said that the share market has had a pretty good 5 or 6 weeks and I think right from the word go when the election was called the share market probably took more notice of the bookies rather than the polls and we’ve really outperformed other global markets, so I think that sort of Tony Abbott win has sort of been priced in.

ANZ chief economist Warren Hogan: There’s no doubt that it should be a small boost for both the currency and the share market but this result was anticipated.

Perpetual head of Australian equities Matt Williams: I think the stability will be welcomed but whether that is going to mean a stronger market in the short to medium term, no I don’t think so, I don’t think we’ll see that.

Philip Baker: The share market investors will be looking at them to sort of see well okay how will you get growth going? How are we going to come out of this post-resources boom? How are you going to help manufacturing? How are you going to help other sectors apart from housing do well?

Warren Hogan: We’ll see growth start to emerge outside of mining, we’re starting to see house prices really move up, we’re starting to see confidence in that sector build, that’s going to soon translate into activity, job creation and residential construction and hopefully combined with less political uncertainty we’ll see the economy moving along strongly by the middle of 2014.

Philip Baker: 12,000 jobs in the public service are about to go, generally I think economists around town expect the unemployment rate to increase which does put a little bit of pressure on the Reserve Bank.

Warren Hogan: Any further rate cuts will be due to undesirable economic weakness so if anything, if the change of government heralds a sort of renewed confidence in increased investment spending over the new year for the Reserve Bank it could mean they start having to think about having to raise interest rates at some stage in late 2014 or 2015 but in the short term I don’t think the change in government has any implications for monetary policy.

Matt Williams: A more stable regime and less changes, ad-hoc changes to regulatory and tax systems. What’s unknown is the financial services inquiry that will take place. What are the outcomes out of that? I think that’s more interesting.

Warren Hogan: It would be a real waste if we didn’t see a renewed focus on structural reform, an understanding of how to get our government finances on a firm footing and reduce the constant surprises we’ve been getting on that front over recent years, I think this is really going to raise the interest of international investors because there’s no doubt that Australia remains a great investment opportunity for investors who are looking to get exposure to the Asian region.

Philip Baker: I think most people think that the share market will be a little higher over the next 12 months, that dividend growth is a big part of that but I still do think, a broad braced rally where everyone does extremely well is probably some way off and picking the right stocks will be crucial to getting a decent return.

Deborah Knight: Well from our three wise men to our two wise women and Jennifer there are a lot of factors impacting the budget much is beyond the control of the government, things like global uncertainty?

Jennifer Westacott: Certainly on the revenue side there’s more volatility with the terms of trade but governments can plan for that. On the spending side, that’s totally within governments control and it’s absolutely up to governments to get spending under control and to get more resilience, more buffering in the spending program so that you can deal with those ups and downs of the terms of trade, of nominal GDP falling and so on because in companies, lots of things happen in the global environment, what do companies do they sit down, they restructure their business, they priorities what they’re doing. That’s what we’ve been calling on the government to do and that’s why, as I said earlier this audit is hugely important. And similarly the government can create a more stable environment through some of its policies, good tax reform can remove some of the volatility in revenue, making the economy more competitive can stimulate economic growth. The government has a lot more control then I think is being talked about and its really got to take control of those budget levers and get it done.

Deborah Knight: And the expectation are Laura that they do need to deliver confidence, growth, a lot of good times ahead quickly.

Laura Tingle: Well exactly, there’s been a lot of talk about how the world is about to- the sun will shine and the flower will bloom as of today, so given that a lot of this stuff is long term, the risk for Tony Abbott is he’s essentially followed the Barry O’Farrell model which was very heavily criticised by business when he first came in despite the fact that he’s made some really good in roads now, he wasn’t seen to be doing very much. So I think a lot of the crucial bit for Tony Abbott and Joe Hockey and the team will be in re-establishing those relationships in business and re-assuring them but the question is with the softening economy is whether you’ll get enough of a kick back so people go oh yes the world really has changed.

Street Talk reveals Vocation float plans

Deborah Knight: Well we can reveal that John Dawkins, the former Treasurer and education minister during the Hawke and Keating governments will be chairman of a new education company being prepared for listing on the share market later this year. Street Talk has information that Vocation is a roll up of three existing companies. Specialising in vocational education and training, it’s initial public offering is set to raise $300 million. John Dawkins was the architect of significant education reform during his time in government, he’s since been on the board of several listed companies including Elders Rural Bank. The planned float is further evidence that education is now one of Australia’s fastest growing export sectors. Vocation is backed by former Macquarie Bankers Michael Carapiet and John Prendiville. Due diligence began last week with investment banks Macquarie and UBS appointed joint managers for the IPO.